World stock markets pause amid growth concerns

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SummaryDollar held steady, caught between conflicting views of when US central bank is likely to pull back on its stimulus.

World stock markets mostly dipped on Tuesday after the OECD cut its global growth forecasts, though expectations for continued stimulus from the US Federal Reserve helped Wall Street pare early losses.

The dollar held steady, caught between conflicting views of when the US central bank is likely to pull back on its stimulus.

The Fed’s bond-buying programme, which is providing liquidity of $85 billion a month, is seen providing a floor to equity prices, though investors are keen for clues of when the Fed will begin to scale back the programme. With stock indexes around the world near multi-year or all-time highs, market participants are also concerned that a recent rally may have gone too far amid signs of tepid growth.

“There’s no real news to propel the market higher but no real options for investors in terms of other places to put their money,” said Rick Meckler, president of investment firm LibertyView Capital Management.

“The market will likely stay here until the beginning of next year and the Fed decides when is a good time to change policy.”

In its latest snapshot of economic activity, the Paris-based Organization for Economic Cooperation and Development cut its 2014 forecast for global economic growth to 3.6 per cent from the 4.0 per cent it saw in May.

MSCI’s world equity index, which tracks shares in 45 countries, fell 0.3 per cent, after hitting a six-year peak on Monday.

The Dow Jones industrial average was up 0.70 point, or 0.00 per cent, at 15,976.72. The Standard & Poor’s 500 Index was down 0.63 point at 1,790.90. The Nasdaq Composite Index was up 0.07 points at 3,949.13.

In Europe, shares fell 0.6 per cent, receding from a recent five-year high.

“Pan-European multiples are close to multi-year highs. That means markets are no longer cheap and we need to see some earnings improvement to warrant higher equity prices,” Gerhard Schwarz, head of equity strategy at Baader Bank, said.

Earlier, optimism sparked by China’s bold economic reform plans continued to bolster Asian markets, lifting MSCI’s index of Asia-Pacific shares outside Japan by 0.2 per cent, extending Monday’s 1.4 percent rally.

The dollar held steady

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